In an administrative declaratory ruling, the Florida Department of Financial Services (DFS) announced that Florida’s unclaimed property statute requires life insurers to search the Social Security Administration Death Master File (DMF) to seek out information on potential deaths of insureds. The DFS also ruled that, for purposes of triggering a company’s unclaimed property reporting obligations, the dormancy period begins to run at the insured’s date of death. Click here for a copy of the DFS declaratory statement.

The DFS opinion was triggered by a petition from Thrivent Financial for Lutherans for a declaration that its life insurance policies become “due and payable as established from the records of the insurance company. . . when Thrivent receives proof of death and a claim for benefits.” In its petition, the insurer averred that it did not use the DMF “in any systematic manner in connection with its Florida life insurance business,” and “that it has never made ‘asymmetrical use’ of the DMF.” Regardless of any prior use of the DMF, the insurer argued that it was not obligated to use the DMF to independently determine whether its Florida insureds had died or to trigger any timetable for reporting and remitting insurance proceeds as unclaimed property.

Rejecting the insurer’s position, the DFS first ruled that a claim is “due and payable” for unclaimed property purposes at the time of the insured’s death, regardless of whether the company has received a notice or proof of death. The DFS stated that under Florida’s insurance laws, a life insurance policy “becomes a claim by the death of the insured,”1 though the term “claim is not defined in the statute.” The DFS then rejected the insurer’s argument that life insurance policy proceeds “do not become due and payable… until [the company] receives proof of death and a claim for benefits.” The DFS stated that the insurer’s “interpretation of [Florida law] would require an owner to make a demand for payment before the dormancy period would begin to run.” According to the DFS, this interpretation would not give effect to the unclaimed property provision that purports to make property payable even when the owner has not made a demand for payment.2 In light of the DFS’s view, and because Florida law “only requires that records of the insurance company establish the date that the funds become due and payable,” the DFS ruled that the term “due and payable” means “upon the death of the insured.”

Second, the DFS rejected the insurer’s argument that, under current Florida law, insurers do not have an affirmative duty to determine whether insureds have died. The DFS decision relies heavily on a “due diligence” provision in the Florida unclaimed property statute to support a DMF search requirement. Under Florida law, before remitting property to the state, a holder must use “due diligence” to locate owners of abandoned property. “Due diligence” is defined as “reasonable and prudent methods… to locate apparent owners of inactive accounts using the taxpayer identification number or social security number, if known, which may include, but are not limited to, using a nationwide database, cross-indexing with other records of the holder.”3 The DFS interpreted this provision as requiring insurers to affirmatively seek out information about potential deaths of insureds using the DMF.

According to the DFS, requiring insurers to search the DMF “is consistent with the manifest purpose of chapter 717, Florida Statutes” requiring an insurer to “take reasonable steps to pay the beneficiary” once an insurer learns of the death. The DFS also expressed its policy views on this issue:

In an age when an unprecedented volume of information is readily available in digital form, the Department sees no reason why an insurance company… should balk at making reference to a publicly accessible digital database that would entirely reveal whether any of its insureds had died. A simple exercise of due diligence – reference to the DMF maintained by the Social Security Administration or comparable national databases – would reveal whether there was any potential for benefits to be due under an existing life insurance contract.

Though Florida has adopted many provisions of the 1981 Model Unclaimed Property Act, the Florida “due diligence” provision upon which the DFS based its decision does not exist in either the 1981 or the 1995 Uniform Unclaimed Property Act, upon which most states’ unclaimed property statutes are based.

The insurer has the right to seek review of the declaratory ruling by appealing to the appropriate District Court of Appeal within 30 days of the ruling’s entry. The company is expected to appeal.

1 Fla. Stat. § 627.461 provides that “[e]very contract shall provide that, when a policy becomes a claim by the death of the insured, settlement shall be made upon receipt of due proof of death and surrender of the policy.”

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